Former Banker

I like money that I don’t have to physically work for. I am in love with the concept of working once and reaping the rewards over and over again. I don’t care how you call it, passive, residual, or portfolio income, if I don’t have to babysit it, I’m interested. So it’s not surprising that real estate is (from a conceptual standpoint) one of my favorite ways to make money. You want to bring up clogged toilets in the middle of the night? I believe that’s what property management companies are for.

Not too long ago, I read a Wall Street Journal article asking the question “Are you ready to be a landlord?“. Even though the subtitle said “Buying Investment Properties Can Be Risky. Here’s How to Do It Smartly“, I thought it was an overwhelmingly negative outlook on real estate investing. Actually, it got me wondering about the editorial process at WSJ, because obviously the author wrote the can be risky part, but the how to do it smartly part was forgotten. Even the so-called advice was framed negatively.

There is no investment opportunity that doesn’t carry risk. Heck, even not investing your money is risky: if you stash your money under a mattress or put it in a bank, you expose yourself to the risk of inflation eating away its value. And everyone knows about the risk-return tradeoff. I don’t know, maybe my love of entrepreneurship is clouding my judgment but the way I see it, now is the best time to invest in real estate if (BIG IF) you have the money and/or can get access to financing.

It’s telling that while everyone is panicking about how the market is going down, Warren Buffett, the most successful investor of our time, is busy buying left and right. We’re pepper-spraying others for Black Friday sales, but we’re bitching about the biggest investment sale since the Great Depression.

Caveat: education precedes action (or it should). So I’m not saying that people should just rush out and invest in real estate without knowing what they’re doing. There’s actually a reason why I personally haven’t taken the plunge yet: I have to learn more. Even the little education I’ve gotten so far has already pointed out some things that I want to know a lot more about, especially how to build a team to help me navigate the deals so I can know what to pick and what to walk away from. And even then, I know for a fact I will make mistakes.

But I digress. Instead of scaring people into not investing, publications like WSJ should instead embark on a mission to at least point people in the right direction for them to find the information that will help them make better financial decisions. Can you imagine the uproar if they had published a similar article about moving up the corporate ladder and just pointing out all the negatives?

I can’t remember where I read or heard this (this is what happens when you don’t take notes) but it’s one of my favorite quotes: “Fear will keep you from taking action when you should, and greed will cause you to take action when you shouldn’t”. The only way you can avoid those pitfalls is to educate yourself and take action to gain experience, whether you’re contemplating starting a business, investing in the stock market, investing in real estate, or anything similar.

So I don’t think I’m crazy. Warren Buffet says the same thing as the aforementioned quote but in other words: “Be fearful when others are greedy and greedy when others are fearful”. John Paulson completed the greatest trade ever by being fearful when others were greedy. Now others are fearful. Time to be greedy.